For United Spirits Ltd, the next few quarters will be shaped by how well it navigates a structural reset in Maharashtra, one of its crucial markets, without sacrificing profitability. Higher excise duties and the rollout of Maharashtra-made liquor (MML) have altered consumption patterns in the state, weakening demand for Indian-made foreign liquor (IMFL).
A lack of exposure to MML has proved a problem for United Spirits. In the December quarter (Q3FY26), overall volumes fell about 3% year-on-year, weighed down by Maharashtra and a high base in Andhra Pradesh, where one-time retail pipeline fill had lifted volumes last year. The popular segment, which contributes roughly 9% of revenue, bore the brunt of the adjustment, with a 9% volume drop.
The stress was far more contained in the prestige & above segment, which contributed 89.4% of Q3 revenue. The segment’s volumes declined 2%, though it delivered around 8% value growth. Pricing and mix did most of the work, allowing standalone revenues to grow 7.3% year-on-year despite lower volumes.
This divergence reflects a longer-running shift in which United Spirits’ premium and luxury brands have continued to grow faster than the category, compensating for weakness at the lower end. Signature, Johnnie Walker, Godawan and Don Julio have led this trend.
The mix shift has helped profitability. Gross margin rose 219 basis points year-on-year to 46.9%, aided by higher realisations, product mix, and relatively stable input costs. Management expects margin to be broadly stable despite emerging bulk Scotch inflation, aided by continued premiumization and sustained brand investments. Notwithstanding near-term volume pressure, the company continued to guide for double-digit revenue growth in the prestige & above segment over the medium term.
How long will it hold?
To be sure, the MML disruption in Maharashtra isn’t fully behind the industry, and policy uncertainty remains elevated. “Following GST rate revisions and the recent increase in the excise rate for tobacco, states may see tax revision in upcoming budgets. Also, the UK FTA is seen as positive for growth and margins, but concerns remain regarding states absorbing the benefits,” Emkay Global Financial Services said.
United Spirits expects the India-UK free trade agreement won’t be implemented before Q2FY27. It indicates around ₹110-120 crore of annual benefit from lower bulk Scotch duties. With the stock trading at around 48 times estimated FY27 earnings, as per Bloomberg, the market is betting that premiumization can offset policy-driven volume pressure. How long that holds while regulatory uncertainty persists remains to be seen. Investors will closely watch for volume growth recovery.